Regulatory Alerts2020-07-20
Added · Updated
Guidelines on liquidity stress testing in UCITS and AIFs
These Guidelines establish supervisory practices for liquidity stress testing in UCITS and AIFs, applying to managers, depositaries, and National Competent Authorities from 30 September 2020. Managers must integrate stress testing into their risk management frameworks, documenting policies that define roles, scenarios, and frequencies, with a recommended baseline of quarterly testing adapted to fund characteristics. The document requires the use of hypothetical and historical scenarios, including reverse stress testing for high-impact risks, and mandates that models account for liquidation costs and time to liquidity under stressed conditions. National Competent Authorities are required to notify ESMA of their compliance status within two months of publication.
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